Many Illinois consumers might be surprised to learn that health insurance rates are regulated (or not) on the state level. This was the case before the federal health reform law was passed earlier this year and, by and large, remains the case. Federal rate regulation was included in some early drafts of the law, but not in the final version.
Over the next few years, Illinois consumers will benefit from many reforms enacted in the federal law that will bring to an end to some of the unfairness and excessive cost of the until-now unregulated Illinois insurance market. Illinois is the national leader in the number of rescissions—or retroactive cancellations of an insurance policy. Illinois companies can and do charge identically situated women more than men--as much as 57% more. Illinois law allows for individuals and families to be denied health insurance for any reason other than “race, color, religion or national origin.” Case in point: a widow was denied health insurance for herself and her three children because she attended grief counseling to help cope with her young husband’s death. Apparently grief is a pre-existing condition. All of these practices have changed or will change soon under the reform law.
The unchecked state health insurance market in Illinois will not change with respect to rates, however. Insurance companies have been able to increase health insurance premiums with little oversight, transparency, or public accountability because current Illinois law does not restrict health insurance rate increases. In contrast, residents of over half the states and the District of Columbia are protected, because their states have the statutory authority to reject a proposed increase that is excessive, lacks justification, or exceeds certain standards.
This lack of authority has contributed to unfettered and unjustified premium increases. Health insurance premiums have doubled on average over the last decade, much faster than wages and inflation, putting coverage out of reach for millions of consumers and business owners. Next year, Chicago workers can expect to pay 12.4 percent more in health insurance premiums and out-of-pocket costs for their health insurance, according to a recent study. And for Chicago employers, the average cost per worker will rise 8.7 percent, including employee contributions to premiums—the highest increase since 2006 and about the same as the national average of 8.8 percent. And if a small employer in Illinois has even just one injured or sick employee, the business can experience rate increases of greater than 50 percent when it’s time to renew.
Further, a recent report from the Illinois Department of Insurance revealed that Illinois families and individuals have experienced striking base rate increases in their health insurance coverage, often greater than 30 percent since at least January 2005. How can these unchecked rate increases be stopped? Rate approval authority, through the Department of Insurance, has the potential to improve the performance, transparency and accountability of the health insurance market for employers and families. Illinois families trying to obtain financial security and peace of mind in their purchase of health insurance are entitled to have reasonable and fair premiums.
While federal regulation of health insurance rates was not part of the national health reform law, that law does provide a strong foundation for Illinois to start passing necessary insurance reforms at the state level for the almost seven out of ten Illinoisans (69%) who have private insurance policies. The Affordable Care Act provided Illinois a one million dollar grant to help Illinois set up a system of review and public information about rate increases, requiring the companies at least to publicly reveal their justifications for rate increases. Beyond improving public information, however, national reform did not give Illinois the power to deny or reduce rate increases (like it does for public utilities); only Illinois can do that.
The Illinois Department of Insurance intends to pursue rate review authority, and consumers can and should help in this effort to put the breaks on unfair health insurance premium increases. Illinois consumers of health insurance, be they individuals and families buying their own coverage, employers buying coverage for their employees, or people covered through their work policies, need to start speaking up about the need for rate review authority in Illinois. They should tell their representatives in the Illinois House and Senate to pass strong rate review legislation now. And they also should speak out to the other interests involved here--their insurance brokers and the insurance companies, too. The message to all is the same: the time for rate review is now.